Students have $1.2 trillion in outstanding loans - and repaying them early isn't always easy, according to a new Consumer Financial Protection Bureau report.Milan Kecman, Plain Dealer

Private student loan borrowers just can't win.

When they try to make extra payments to get out from under high-interest private loans, they often find their efforts thwarted by servicers.

Conversely, those struggling to make payments get a cold shoulder from servicers when they ask for adjustments.

There's clearly a disconnect between borrowers and private loan servicers, the Consumer Financial Protection Bureau says in its latest report on private student loans, released today.

And servicers, the report found, tend to profit from those misunderstandings.

Déjà vu? It sounds like it to regulators.

"I'm concerned the same chaos we saw in the mortgage market may be repeating itself in the student loan market," CFPB student loan ombudsman Rohit Chopra said in releasing the report, the first to consider an entire year of borrower complaints.

Chopra said regulators would step in if servicers couldn't clear the hurdles borrowers regularly encounter.

In sifting through the gripes of roughly 3,800 borrowers, the bureau identified common problems:

Misapplication of extra payments. Borrowers who sent extra money intending to paying off their highest interest loans faster complained servicers routinely divided up the extra payment among all their loans equally. That could cost a borrower hundreds of dollars over the life of her loans.

Confusion about how extra payments are applied. Borrowers who try to make extra principal payments say they often get confusing statements that indicate the payment was applied to their next loan installment, leaving them uncertain about how much to pay the following month.

Maximized late fees. When a borrower can't scrape together a full payment on multiple loans and makes only a partial payment, servicers tend to spread the partial payment across all loans evenly, rather than applying it to one entire loan payment, then applying the remainder to the next loan. That effectively ensures that no loan is fully paid for that month, allowing the servicer to collect late fees for every loan.

Mixups when loan servicers change. Borrowers reported that when their loans are transferred from one servicer to another, information gets lost. They also don't get clear information about new payment rules, so when they make payments using the old servicer's requirements, they are penalized.

Inability to get workouts. About half of the complaints the CFPB received came from cash-strapped borrowers who said they couldn't get their lenders to budge on modifications or adjustments. (Over the summer, federal regulators assured banks that they wouldn't be penalized for attempting workouts with struggling borrowers -- and Chopra said that when students asked for some type of payment reduction, "we're seeing increasingly, they're more successful.")

Although the report only looks at private student loans, Chopra noted that many of the servicers who garnered complaints also handle federal student loans.

To address borrower complaints that online payment platforms default to even distribution of payments, the agency recently published guidance advising servicers to reconfigure sites so consumers can include instructions on how they want payments applied.

The problem for consumers may be figuring out how to decide the best payment strategy for them, and how to make their wishes clear to servicers.

The CFPB provided advice to consumers about the best strategies for paying off student loans and issued a sample letter borrowers can use to instruct servicers how to apply payments. Find it at bit.ly/loanletter.

Sallie Mae accounted for nearly half the complaints made to the CFPB, although the bureau noted that share of complaints wasn't surprising considering the company's sheer size.

Next in line was American Education Services/PHEAA, which was in a distant second place with 11 percent of complaints. Rounding out the Top 8, in order of complaints, were Wells Fargo, Discover, JP Morgan Chase, ACS Education Services, and tied at the end were Citibank and KeyBank, each with 3 percent.

The Consumer Bankers Association issued a statement criticizing the report for making a "sweeping characterization" of the market based on a relatively small number of complaints and expressed disappointment that the CFPB didn't take a closer look at federal student loans, which make up the vast majority of loans issued to students.

On a bright note, the CFPB's last report on private student loans seems to have had some impact. Last year, the agency noted that lenders seemed to be ignoring the Servicemembers Civil Relief Act, which cuts breaks to active duty military members who request relief. The 2013 report said that while problems still exist, many lenders had made strides to correct lapses. (Those who didn't may be motivated by the bureau's stated intention to work with the U.S. Department of Justice to make sure "violators are held accountable.")

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